An Overview of Corporate Social Responsiblity
Good Corporate Citizens Consider Social and Environmental Impacts.
Jun 6, 2009
The decisions made by businesses, both large and small, have an effect not only internally but also on the wider community. Corporate social responsibility, also known as corporate citizenship has no fixed definition; however it is used to refer to the business approach where operational decisions are made after considering the economic, social and environmental impacts.
Consumers are now making purchasing choices based on an organization’s corporate social responsibility performance and reputation. Websites such as Ethical Consumer assist consumers to make ethical purchasing decisions by listing details of companies to boycott based on alleged poor economic, social or environmental impacts. According to a report by the Co-operative Bank in the UK in 2006, consumer boycotts of food, clothing and travel companies totaled over £2.3 billion.
The main tenets of social corporate responsibility can be summarized as follows:
Environmental Sustainability
Business operational decisions should be made with environmental sustainability outcomes in mind. Environmental sustainability refers to ensuring that there is as little impact as possible on natural environments and eco-systems. It can include using recycled material where possible, reducing the carbon footprint of business operations, utilizing technology to reduce impact on eco-systems and using energy-efficient production methods.
Social Impacts of Business Operations
Business does not operate in a vacuum; it is part of a wider community, both locally and globally. The social impact of business operations refers to a business’ human resources policies, its approach to human rights issues (particularly relevant for businesses who operate in third world countries or countries where human rights are not adequately protected), the relationship the business has with any indigenous people living in the area and the business’ actions in relation to world politics.
Economic Impacts and the Fair Trade Initiative
Operational decisions made by businesses have an economic impact on both the business itself and the community the business is situated within. For example, a business that decides to expand its operations in a certain area will potentially increase the flow of money into the economy of that area. The Fair Trade initiative, which ensures that, among other benefits, primary producers in Third World Countries receive a reasonable sale price for their commodities, was created partly in order to address unfair trading practices by western businesses.
Governance, Ethics and Transparent Practices
Corporate governance refers to the laws and regulations that a company must abide by, together with the company’s own policies on how its operations should be undertaken and how the company should interact with stakeholders. Business ethics affects every area of the business from production to sales to human resources. Ethics means ensuring that the decisions of the business are not deliberately harmful to any person or environment. Businesses with good governance programs may adopt transparent practices; transparency refers to the openness and willingness of a business to show stakeholders details of business practices and transactions. This can be through showing detailed financial statements in annual reports or providing the reasons why a decision was made to stakeholders.
Corporate social responsibility is a growth area in the 21st century as consumers become more aware of the social and environmental impacts that their purchasing decisions have. Businesses that are willing to accept that they are corporate citizens of the world, will consider the impact that their operational decisions have on people and planet and ensure that these decisions are not harmful.
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